Solyndra

Solyndra Investor's Strategy: "Down cycles become up cycles."

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David Prend looking at cylinders.

If you're still withdrawing from Breaking Bad's recent season closer, don't worry: Solyndra has enough material for anybody craving a convoluted tale full of characters so repulsive you don't dare look away. 

Reuters' Nichola Groom, Sarah McBride, Cezary Podkul and Roberta Rampton profile David Prend, the RockPort investor we last met leaning on the U.S. Navy to buy Solyndra solar panels and fatefully persuading President Obama to make the Fremont, California company the centerpiece of his green subsidies publicity. Prend, a dedicated green investor, declined to be interviewed, so a few professional associates come in to blow smoke up his ass: 

"He's a very cerebral kind of guy," said Mark Heesen, president of the National Venture Capital Association. "But you'd better listen when he talks, because it's usually something important."

Sounds impressive! Here are some samples of Prend's gargantuan excogitation: 

"It is our experience that these down cycles become up cycles, and we have almost 40 plus companies in our portfolio that we believe are well poised to produce strong returns for our investors," he said… 

Clean tech "is bigger than we ever thought it would be, and there are many macro factors that will cause it to continue to grow," he said, citing the electrification of transportation, green buildings, and the role of the Internet in energy conservation. "The opportunities are varied, global and gigantic."

And the nut of the sad saga, which begins with Prend's $16 million investment in the company in 2006: 

Solyndra caught the eye of VC funds with a new technology for turning solar rays into electricity using long round tubes rather than flat panels in order to absorb more sunlight.

There were two reasons these were expected to be cheaper than traditional photovoltaic panels: first, the tubes, shaped like fluorescent light bulbs, could be made in a highly automated factory, which would offset the cheap-labor advantage of Chinese plants. Second, Solyndra's recipe for converting sunlight to electricity didn't require expensive silicon, relying instead on a mixture of copper, indium, gallium and selenide, or CIGS.

Prend bought it. He invested another $6 million in 2007, around the same time a number of other private investors, including Henry Kravis's KKR, Madrone Capital Partners, which invests on behalf of Wal-Mart heirs, and Argonaut Private Equity, a fund attached to Obama fundraiser George Kaiser, put in cash. Solyndra raised $215.9 million that year. In October that year, President George W. Bush's Department of Energy announced its final rules for a green-tech loan-guarantee program, listing Solyndra as one of just 16 companies already approved to apply for the loans. Others on the eligibility list included Tesla and solar company BrightSource Energy.

At first things seemed to be going well. In 2008, Solyndra started shipping its tubular panels and announced it had $1.2 billion in orders. RockPort put more than $30 million into the company over 2008 and 2009. The next year, Solyndra's $535 million DOE loan came through, and the company quickly filed for an initial public offering.

But behind the scenes, the situation was deteriorating. The global economic crisis deflated the sky-high valuations of clean-tech startups. Solyndra, for instance, fell from a valuation of $1.4 billion in July of 2008 to $791 million in little more than a year, according to Thomson Reuters data. Even established players such as publicly traded solar panel maker First Solar suffered big declines; its stock dropped 43 percent in this same time frame.

Sales lagged, too. Customers held off buying anything they didn't absolutely need, including solar energy. And those who did invest often chose cheaper products from China, where the government was aggressively subsidizing solar companies. Silicon prices were falling fast, which meant Solyndra's silicon-free technology lost its cost advantage.

Whole story.

Note that all the above took place before Energy Secretary Steven Chu decided to give the company $535 million of your money – of which Solyndra managed to disappear $528 million before going bankrupt. 

More Reason Solyndra coverage

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  1. IPO baby.

  2. For no particular reason, Red Sonja.

    1. Looked particularly reasonable to me.
      Is this a new movie?

  3. The really funny thing is that the tax credit / rebate provisions for solar energy in ARRA made the last three years the most favorable environment for these companies in history.

    And these bums still tanked.

    30% of the purchase price of every one of the products these guys sold was directly rebated by the Feds to the purchaser.

    And they still tanked.

    1. This is from the government that cannot figure out to make a profit selling booze via a monopoly, and actually turn a profit running a brothel. You actually expect their rent seeking friends to be any better?

      1. “This is from the government that cannot figure out to make a profit selling booze via a monopoly, and actually turn a profit running a brothel.”
        You left out the USPS.

        1. …and IRS Burger.

  4. What still baffles me is what the FUCK did they spend half a billion dollars on?

    I understand their new “state of the art” assembly plant had some smoked windows and showers and fancy paneling, but even including all that it seems tough to justify that this adds up to half a billion.

    What exactly did they buy that caused them to burn through all of this money so fast?

    1. “They put people before profits!”

    2. What exactly did they buy that caused them to burn through all of this money so fast?

      They lost money on every unit sold, and we helped them produce way faster.

      1. I understand the $3-$6 per unit market gap they had that but even with that, any company of that size would have to have had an accounting system defect to allow ANYONE to take them seriously.

        And by defect I mean someone had to have cooked the books- in a Green Egg, on super high temps, for like weeks to come up with a ROI sheet that put them even treading water a year before the loan was guaranteed.

        I’d like to know if a.) the numbers on Solyndra were altered between the Bush and Obama administrations, as the former denied the loan and the latter approved and b.) who replaced whom on the boards that were assigned to review the Solyndra numbers prior to loan approval.

        These particular individuals are the ones that need to go before a Senate hearing. The rest of them have been just far enough removed from said paperwork to actually admit that “yes, I’m the one who signed off on the numbers for loan approval”. Which ones aren’t?

        1. “These particular individuals are the ones that need to go before a Senate hearing. The rest of them have been just far enough removed from said paperwork to actually admit that “yes, I’m the one who signed off on the numbers for loan approval”. Which ones aren’t?”

          Supposedly, Sarb-Ox (which is a “non-regulation” to brain-deads, since *everything* was “un-regulated”) was supposed to solve this sort of issue.
          As I understand it, the CEO is responsible for the books, period. He signs a statement to that effect and thereby becomes directly liable for any pernicious results.
          But then Obama was ‘buds’ with the Solyndra guys, so we’ll see how it shakes out, given they were “un-regulated”.

          1. As I understand it, the CEO is responsible for the books, period. He signs a statement to that effect and thereby becomes directly liable for any pernicious results.

            Agreed, but if I handed Solyndra’s numbers to any major bank and said “give me a loan for half a billion dollars, here are my numbers”, and they DID, the bank would be liable as an accessory for investment fraud.

            So since “the bank” in this case is “us” which one(s) of “us” signed off on the loan?

            According to the previous hearings (Solyndra and The DOE Loan Guarantee Program), neither Jeffrey Zients-
            OMB-Deputy Director did nor did the current-at-the-time now former Jonathan Silver, Former Executive Director of the DOE Loans Programs Office, they both showed up after the loans were made.

            Who signed the loans?

            1. OK, the CEO is responsible at the receiving end for the funny books (Sarb-Ox).
              “Who signed the loans?”
              There has to be a signature at the bottom; the only remaining question is whether that person is expendable.
              I’m going ‘way out on a limb and guessing that person is, and no one higher than that will suffer more than embarrassment.
              And I’ll also bet, unlike Skilling, the CEO isn’t going to hurt much, either. Hey, a half-bil of taxpayer money? Who cares?

  5. “…didn’t require expensive silicon…”

    It’s only the SECOND MOST COMMON ELEMENT IN THE EARTH’S CRUST!

    1. Extremely refined silicon. Purification from an ore can be quite expensive.
      Aluminum is the third most common element in the Earth’s crust. Yet prior to the inventions of the Bayer and Hall-Heroult processes, aluminum was more expensive than silver. Now it’s so cheap we wrap our leftover food in it for a week before throwing it in the trash.

      1. I’d be more attuned to that notion of refined silicon being very expensive, but versus indium? Gallium? Obviously needing similar level of purity for thermoelectric conversion like Solyndra’s panels?

        Not so cheap compared to refined silicon anymore, especially given the relative economies of scale in already-extant silicon processing industry vs. the much more specialized indium analog of same for instance. Gallium arsenide is critical component in modern chips, and it is not the cheapest part of those wafers whatsoever.

    2. Well to be fair, semiconductor grade silica isn’t cheap after its been cleaned up.

      1. Officer, am I free to gambole across this thread?

  6. I remember merry-prankster posting here about this new-fangled, grand green plan for the US Army to start using solar and what not in an unprecedented and bold environmental initiative. Solyndra wouldn’t have been in the middle of that deal?

  7. “He’s a very cerebral kind of guy,” said Mark Heesen, president of the National Venture Capital Association. “But you’d better listen when he talks, because it’s usually something important.”

    Oh jesus, the moment someone says that about a fucking suit is the moment I unass the fucking room.

    1. “I unass the fucking room.”
      I’m stealing that.

    2. That is some USDA Grade A bullshit right there. I’ll bet he guy used to be a consultant.

  8. If you’re still withdrawing from Breaking Bad’s recent season closer

    The penultimate scene had jesse & walt shaking hands in a parking garage, but the camera angle was from some other section & i could hear labored breathing. Obviously next season’s villain but can’t figure out who it would be – Gus sure looked dead; Skylar’s old boss seemed the same way; Mike? if so, why the breathing? Any theories?

    1. I think you’re hearing things.

      I say Hank gets on to Walt and the last season will be them playing cat and mouse, with Mike thrown in for good measure.

  9. I think it unfortunate that the Kochs weren’t well invested into Solyndra – if only to watch the befuddled heads of lefties exploding.

    1. Hey, they bought the biggest protest-sign supplier for the OWS group.
      They’re hoping for a big protest about it.

  10. It is our experience that these down cycles become up cycles

    That’s all well and good, if you buy in at the bottom.

    Otherwise, it’s hard to convince people of your Cerebraliciousness.

    1. That whole phrase

      down cycles become up cycles

      makes me question his Cerebraliciousness.

      A cycle, by definition, has both ups and downs. What the flaming fuck is a “down cycle”?

  11. Solar is too expensive. The companies buying chinese solar were doing as window dressing only for being green, as alternative sources of power still made the competitiveness of solar terrible. No amount of money will fix the energy intensity gap solar has vs. coal, though the administration is hoping to drive coal and gas supplied energy prices out the roof via the EPA.

    1. , though the administration is hoping to drive coal and gas
      supplied energy prices out the roof via the EPA.

      There’s a lefty argument involving the word “externalities” coming.

  12. “Is this where the Internet goes?”

  13. “…And those who did invest often chose cheaper products from China, where the government was aggressively subsidizing solar companies…”

    Gosh, I wonder if it’s that and not the sub-human labor conditions that have fueled China’s capitalist miracle.

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